For Johnson Controls, a Split Creates Opportunity, Vulnerability

NEW YORK (The Deal) -- Johnson Controls (JCI) is shifting back toward its roots with its announced move to separate its massive automotive unit and focus instead on building controls and energy storage. But management still has considerable work to do once the auto business is gone if Johnson Controls hopes to stay independent for another century.

Milwaukee-based Johnson Controls said Wednesday it has retained Goldman Sachs (GS) and Centerview Partners to explore options for the automotive business, a collection of seating and related assets that accounted for about 40% Johnson Controls' $43 billion in 2014 sales.

The planned split is the latest in a series of sales for Johnson Controls, which in March said it would sell its facilities business to CBRE Group (CBG) for $1.48 billion, and in years past sold its HomeLink unit to Gentex Corp. and its auto-electronics assets to Visteon (VC).

The resulting company will be focused primarily on battery and energy-storage technology and its building efficiency business, which makes HVAC systems and related controls for residential and commercial properties.

Splitting off what remained of autos had long been seen by Wall Street as the next natural step, with the company in recent years focusing much of its research and development budget in areas other than seating. Johnson Controls management said it is open to an outright sale, spinoff or formation of a joint venture to shed the unit, with a decision expected before year's end.

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